The opinion of the court was delivered by: Skretny, District Judge.
Plaintiff William S. Flickinger commenced this action
against defendants Harold C. Brown & Co. ("Brown") and
Bradford Broker Settlement, Inc., n/k/a Fidata Brokerage, Inc.
("FBI"), alleging against each defendant (1) violation of
§ 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78j,
and SEC Rule 10b-5 promulgated thereunder, 17 C.F.R.
240.10b-5 (First and Fifth Causes of Action), (2) fraud in
violation of state law (Second and Sixth Causes of Action), (3)
breach of contract (Fifth and Seventh Causes of Action), and
(4) breach of fiduciary duty (Fourth and Eighth Causes of
Jurisdiction is predicated on 15 U.S.C. § 78aa and this
Court's pendent jurisdiction.
A non-jury trial was held before me on January 3 and January
4, 1991. This matter is now before me for a final decision on
For the reasons set forth below, judgment is rendered in
favor of defendants on all plaintiff's claims.
1) Defendant Brown is a registered securities broker and
dealer engaged in the business of providing investment
securities advice and services. This includes making
arrangements for the purchase and sale of securities to
clients. It maintains an office for the transaction of
business in Buffalo, New York.
2) Plaintiff William S. Flickinger is an individual who has
been a client of Brown for over 20 years.
3) No written agreement exists between plaintiff and Brown
4) On or about December 1, 1982, Brown and defendant FBI
entered into a "Fully Disclosed Clearing Agreement"
("Agreement") (Exhibit 17), pursuant to which FBI was to
execute and clear securities transactions for Brown's clients.
5) In addition to clearing securities transactions, FBI in
some cases would keep custody of funds and securities for
Brown's clients. In this case, however, Brown had instructed
FBI that plaintiff's account was "register and ship." Such
designation required FBI to register the securities purchased
on behalf of the client in the client's name and to ship the
to the client at the client's designated address.
6) FBI also sent periodic statements (hereinafter, "activity
statements") to Brown's clients at their designated addresses,
which statements reflected, for a specified period of time,
any activity that had taken place in the client's account for
which FBI had performed clearing services. Copies of the
activity statements sent by FBI to Brown's clients also were
sent by FBI to Brown. Copies of activity statements for
plaintiff's account with FBI for the periods of April 30, 1983
through May 27, 1983 (Exhibit 3), May 28, 1983 through June
24, 1983 (Exhibit 4), June 25, 1983 through August 26, 1983
(Exhibit 5), and August 27, 1983 through September 30, 1983
(Exhibit 6) were admitted into evidence at the trial.
7) Plaintiff at no time had any direct dealings with FBI,
and was not aware that the Agreement between Brown and FBI
8) In 1974, plaintiff executed an authorization (Exhibit 19)
empowering Brown to carry out any instructions received from
his brother, Thomas Flickinger ("Thomas"), regarding the
buying, selling or delivering of any securities for
plaintiff's account. This authorization was in effect
throughout 1983, and during that time, Thomas managed
plaintiff's securities portfolio, had complete control over
plaintiff's account and acted as his agent in most of
plaintiff's dealings with Brown. Plaintiff kept no records of
his investments, other than recording the dividends he
received for tax purposes.
9) On or about June 1, 1983, plaintiff or Thomas instructed
Brown to purchase 1500 shares of common stock of Lubrizol
Corporation, a registered security, for plaintiff's account.
10) On or about June 1, 1983, Brown instructed FBI to
purchase 1500 shares of common stock of Lubrizol Corporation
for plaintiff's account.
11) On or about June 1, 1983, FBI purchased 1500 shares of
common stock of Lubrizol Corporation for plaintiff's account
through a facility of the National Securities Exchange.
12) Exhibit 4, an activity statement for plaintiff's account
with FBI, reflects FBI's June 1, 1983 purchase of the 1500
shares of Lubrizol Stock for plaintiff's account.
13) Plaintiff paid $34,125.00 for the 1500 shares of
Lubrizol stock and $873.14 in commission.
14) As of August 26, 1983, the 1500 shares of Lubrizol stock
were still listed as "BOUGHT RECEIVED OR LONG" (see Exhibit
5), indicating that FBI still had possession of the
securities, or owed the securities to plaintiff.
15) Activity statements provided to Brown from FBI regarding
plaintiff's account for the period of May 28, 1983 through
August 26, 1983 confirmed that plaintiff owned 1500 shares of
16) On or about September 13, 1983, Brown wired FBI to
inform FBI that Brown's records indicated that the Lubrizol
stock was still being held in safekeeping by FBI. This was in
error because plaintiff's account was a "register and ship"
account, and Brown therefore requested that FBI mail the
securities to plaintiff.
17) Exhibit 6, an activity statement for plaintiff's account
with FBI for the period of August 27, 1983 through September
30, 1983, reflects that the 1500 shares of Lubrizol stock were
delivered to plaintiff on September 19, 1983. However,
plaintiff never ...